“The Political Effects of Inequality in Latin America: Some Inconvenient Facts”
Robert Kaufman
Department of Political Science
Rutgers University
Prepared for the “Workshop on Inequality,” Princeton University, September 22, 2007
1
Referring to the extreme economic and racial inequalities that have characterized
his country since the colonial era, Fernando Henrique Cardoso has famously said that
Brazil is no longer an underdeveloped country, but an unjust one. Surveys of mass
publics throughout Latin America indicate that overwhelming majorities hold similar
views about their own societies. All but small percentages in each country agree that the
current distribution of income is “unfair” or “very unfair.” (Latinobarómetro 2001)1
There is also evidence that inequality retards economic growth (eg., Birdsall, Graham,
and Sabot 1998; Rodrik 1999). But even if that were not the case, we should still care a
great deal about the inherent injustice of societies with such high concentrations of
wealth and income.
The purpose of this memo, however, is to raise questions about the political
consequences of inequality -- its effects on popular protest and democratic stability.
Here, there are more reasons for skepticism. Since Aristotle, a high concentration of
wealth is widely thought to lead to intensified class conflict, to encourage destabilizing
populist protest, and to reduce the chances for democracy. But the evidence that
inequality makes a political difference in Latin America is much more problematic than
the conventional wisdom holds. Below, I highlight a number of paradoxes that require
attention.
1.
There is not a strong, direct relation between inequality and democracy
In recent years, the case for the negative political effects of inequality has been
advanced most boldly in work by Carles Boix (2003; see also Acemoglu and Robinson
2006). Following Meltzer and Richard (1981), Boix’s basic model holds that the median
voter can be expected to vote to redistribute by increasing taxes on wealth-holders and
transfers to lower-income groups. In highly unequal societies, this implies that the
chances for democracy are slim. Because the median voter is poor, redistributive
pressures are severe, and wealth-holders are likely to opt to repress these demands
through authoritarian rule. Distributive conflicts are further exacerbated, Boix argues,
when wealth is held in the form of highly specific assets that limit opportunities for
capital to exit the system.
1
Do you think that the distribution of income is very fair, fair, unfair, or very unfair?
2
Such a theory obviously would not appear to auger well for the prospects of
democracy in Latin America, a region with one of the most extreme concentrations of
income in the world (see also Karl 2000). At least in recent decades, however, high
inequality does not appear to have posed an insuperable barrier to democratic transitions
or to democratic stability as conventionally defined. Most of the “third wave” transitions
in the region occurred during the 1980s and early 1990s, a period of increasing
inequality, and most democracies persisted despite continuing high levels of inequality
throughout the 1990s and early 2000. In itself, this does not disconfirm either Boix’s
argument or related theories advanced by Acemoglu and Robinson (2006); each is
qualified in a number of important ways and would require much more elaborate
empirical tests for a conclusive judgment. Even so, the striking juxtaposition of high
inequality and the direction of political change does seem anomalous.
Table 1 provides details. In Costa Rica and Uruguay, two of the most democratic
countries in the region, gini indexes were in the low or mid-40s – good for Latin
America, but well above coefficients for many East Asian and Eastern European
countries. In Chile – another democratic success story – the gini in the early 2000s was
about 56 (one of the highest in the region), and had actually increased slightly under the
democratic governments of the 1990s. Cross-national patterns also quite mixed in other
countries as well. The gini index was relatively low in two widely discussed backsliders
-- Chávez’s Venezuela and Fujimori’s Peru. Conversely, democracy in Argentina has
survived despite a steep increase in the gini measure, and although inequality in Brazil
has fallen since the mid-1990s, it still remains very high.
Inequality may well have affected the quality of democracy in these and other
countries of the region. In highly unequal societies, wealth-holders may be more able to
convert their assets into political power and to limit the effective voice of majorities.
(Reuschemeyer 2004). Moreover, it is plausible that highly unequal societies have higher
levels of corruption and lower levels of social trust.2 But the quality of democracy (what
that means and how it is determined) has not been the main issue addressed by most of
the contemporary political-economy research. In terms of the basic procedural criteria
2
But note that Chile, with a highly unequal distribution of income is also widely viewed as one of the least
corrupt Latin American countries.
3
customarily used to define democratic regimes, inequality does not appear to have a
significant impact.
4
Table 1: Gini Coefficients and Demcracy in Latin America
Country
Changes in
Gini Coefficient Gini Coefficient
Gini in the
Early 1990s
Early 2000s
1980s
Year of 3rd
Wave
Democratic
Transition
1983
1983
1985
1989
1958
1948
1970
1979
1994
1996
1998
2000
1990
1994
1993
1980/2000
1985
1958
Argentina
+
42.6
50.4
Bolivia
54.3
55.9
Brazil
+
+
59.5
57.2
Chile
+
+
54.7
56.1
Colombia
=
-/=
55.9
55.8
Costa Rica
=
=
43.9
44.6
Dominican Rep +
+
50.2 (mid-90s)
48.1
Ecuador
53.0 (mid-90s)
54.3
El Salvador
50.5
51.8
Guatemala
+
56.0
Honduras
=
55.6
53.0
Mexico
+
+
53.9
52.7
Nicaragua
54.2
54.1
Panama
+
+
54.7
54.4
Paraguay
57.8 (mid-90s)
54.9
Peru
=
45.7
47.7
Uruguay
40.8
42.5
Venezuela
=
+
41.7
45.5
Regional
50.5
51.4
Average
Source: David De Ferranti, Guillermo Perry et al, “Inequality in Latin America and the
Cariibbean: Breaking with History?” International Bank for Reconstruction and
Development/The World Bank 2003, Table A.6, p. 402.
Estimates of changes in gini in 1980s: first column is from Londono and Szekely, second
from Morley and Altimir, De Ferranti et al 2003, p.405
2. The poor do not necessarily vote for higher taxes on the rich or redistributive
transfers..
A core assumption underlying both Meltzer-Richard and Boix’s extension is that
in highly unequal societies, politicians face strong electoral pressure for redistribution.
Again, however, the evidence that this mechanism works in democracies is thin. I cannot
cite direct evidence for Latin America with respect to this question, but consider the
following general findings:

Moene and Wallerstein (2001) and Wallerstein and Moene (2003) find that in
OECD countries, the median voter votes against unemployment protection as
she becomes poorer, because she perceives that the cost of additional social
5
insurance outweighs the transfers she would receive if the were to lose her
job.

Cheibub(1998) finds that the tax take of democracies is not significantly
different from the tax take of authoritarian regimes.

In the United States, tax increases are generally very unpopular, despite
growing inequality.

Research on the tax bargain (Timmons 2005) suggests that public goods
directed toward low- and median income voters (schools, health, etc) are more
likely to be financed by an emphasis on relatively flat consumption taxes,
rather than more progressive income taxes. Tax systems that emphasize
progressive income taxes, paradoxically, are more likely to invest in measures
that protect property rights. The logic is simple; if the poor do not pay taxes,
they will not be attended to.

Despite transition to democracy, the tax take in Latin America (outside of
Brazil) is still very low by international standards.
One problem with a simple model that connects inequality, the median voter, and
redistributive transfers is that democracy empowers not only low-income voters, but
middle-income and working-class interest groups that often oppose a shift of resources
toward the poor. Although “high-tax coalitions” of low- and middle-income sectors are
possible, they are by no means inevitable. When they do not materialize, better
organized middle-income interest groups and unions are likely to prevail over the poor in
the contest for scarce resources.
3. Discontent over inequality does not cause voters to reject incumbent office holders.
It has been widely assumed that inequality and/or disappointment with the
unequal distributive effects of neoliberal reform underlies voter electoral volatility and
shifts toward the opposition. Nevertheless, the most systematic analysis of this relation
finds little evidence to support it.
Lora and Olivera (2005) examine electoral shifts in 66 presidential and 81
legislative elections held in 17 Latin American countries between 1985 and 2002. They
find considerable evidence for retrospective voting: general economic conditions have a
consistent impact on whether voters reward or punish incumbents. High inflation is
6
particularly damaging for office holders, as a number of other studies have also shown.
Using the Lora index, Lora and Olivera also find that voters withdraw support from
governments that pursue “neoliberal” structural reforms; surprisingly, this is true even
when these reforms appear to have positive macroeconomic effects. However, they find
no relation between changes in inequality and swings toward the opposition.
Other research which disaggregates specific aspects of reform (Baker 2003 and
2008 forthcoming) shows that privatization is especially unpopular and may well be the
main target of the electoral opposition to “neoliberalism” seen in the Lora and Olivara
study. The important point, however, is that opposition to privatization does not break
along the basic class divide that might be expected from an inequality hypothesis. It is
relatively weak among low-income groups that benefit from increased access to services,
and strongest within the middle class, which already had access but must now pay higher
prices. Trade liberalization, interestingly, has substantial support among all income
groups (Baker 2003), because of its positive effect on price levels and consumer access to
goods and services.
4. There is not a systematic relation between income inequality and left voting.
Swings toward the left in recent years have also commonly been attributed to
disappointment over distributive inequalities. Again, however, there are reasons for
skepticism about any simple relationship. For one thing, as we just saw above, inequality
did not appear to have an effect on swings away from incumbent governments toward the
(left?) opposition. In at least some cases, moreover, left victories had less to do with an
increase in support than with splits among conservative candidates – this was most
notably the case with the recent Sandinista victory in Nicaragua.
More important, if we look across the region, we find only an imperfect
relationship between class divisions and the left resurgence. During Brazil’s presidential
election campaign of 1989, Lula’s support came primarily from the non-poor and middle
class. By the election of 2006, the support base for the PT and Lula had shifted to the
poorer regions in the north of the country, but this resulted from pro-poor policies
adopted by the Lula government after having won office. Support from the poor was an
effect of his initial rise to power, not a cause. Similarly, Chávez’s appeal to low-income
voters was not consolidated until the early 2000s, after the launching of his misiones
7
programs. In Ecuador, the radical candidacy of Rafael Correa drew support primarily
from urban sectors rather than the poorer indigenous population. And throughout the
1990s and early 2000s, the middle classes were more inclined than the poor to support
left parties in Chile and Uruguay (Handlin 2007).
Matthew Cleary (2006) argues that the resurgence of the left in Latin America has
come mainly in countries with long historical experiences with labor-based parties,
presumably because such experiences created an organizational base that could launch
political challenges to inequality. But as is implied above, the causal mechanisms remain
unclear. In Venezuela, Brazil, Uruguay, and Bolivia, left surges were led not by
traditional labor-based parties but by new political movements that arose in opposition to
the old, dominant political alignments. Left movements in Ecuador and Peru, similarly,
were led by outsiders. It may be the case that these outsiders tapped into social networks
and individual voters that had previously supported traditional labor-based parties. This
seems quite plausible in the case of the PRD in Mexico. Otherwise, however, I have not
seen evidence to this effect.
Finally, and most obviously, the “lefts” that have emerged in the last decade differ
widely – from market-oriented social democrats in Brazil, Chile, and Uruguay, to much
more radical, populist movements in Venezuela, Ecuador, and Bolivia. Cross-national
variation in the degrees of inequality does not explain these differences, however. The
closest fit is perhaps Argentina, where the Peronist shift to the left under Kirchner
followed a drastic increase in measures of income concentration. But in Brazil and Chile,
left parties have remained quite moderate, despite very unequal distributions of income.
In Venezuela, conversely, the gini index is relatively low.
Other ways of thinking about inequality
From a broader perspective, it is clear that a variety of factors can be expected to
offset, at least partially, some of the expected effects of inequality on the prospects for
democracy and on the intensification of class cleavages. First, with respect to
democracy itself, international influences appear to have been quite important in recent
decades. Most significantly, the winding down of the Cold War in the mid-1980s
undercut the anti-communist rationale used by military dictatorships to garner
international and domestic support. Even after the memories of these dictatorships faded,
8
moreover, diplomatic pressures and the incentives of international trade have helped to
deter reversions to military rule.
Pro-poor social policies may also have helped to have bolstered the stability of
democratic government, and to have damped the intensification of class cleavages.
Social spending in most countries continues to flow disproportionately to the middle- and
upper classes. But under both left-center governments such as Lula’s and right-center
governments such as those in Mexico, spending has shifted at the margins to lowerincome sectors – particularly in the areas of social assistance, health, and education. The
long-term effect of these programs on human capital and inequality remains a subject of
debate, but it is clear that they provide important components of poor families’ income
and that they are popular. Indeed, in evaluating democratic regimes, citizens may attach
greater weight to the implementation of such programs than to the persistence of longstanding class inequalities over which governments have little short-term control.
Finally, as Robert Dahl (1971: 81-105) argued over thirty years ago, the
connection between inequality and political action must be mediated by a long
intervening chain of causal mechanisms: people must perceive inequality as unjust; they
must believe that government, elites, or other relevant reference groups cause the
injustice; and they must believe in the efficacy of entering the political arena. Finally, to
form effective popular organizations, those who launch challenges to prevailing
inequalities require resources necessary to engage in large-scale and sustained collective
action. For the poor, these mediating steps constitute formidable barriers to political
participation, whether in the form of voting, civic organization, or broader social protest.
Despite these “inconvenient facts,” it would be wrong to dismiss the underlying
distribution of wealth and inequality as politically inconsequential.3 As is true of many
“fundamental” structural variables, however, we should expect that the effects of
inequality in Latin America will be contingent on a variety of other structural and
political factors. Although it is beyond the scope of this short memo to elaborate a full
list of such factors, here are a few that seem, at least potentially, to be especially relevant
in the contemporary Latin American context.
3
Class cleavages have, for example, played an important role in party alignments within Western European
democracies
9
Asset specificity. As mentioned above, Boix’s notable study couples the effects
of inequality with the degree to which capitalists can parry the threat of redistribution
with an exit option or are locked into investments in highly specific assets. It is possible
that this distinction may help to explain differences among more radical and moderate
left government in Latin America. Moderate presidents such as Lula or Tabaré Vázquez
preside over economies where capitalists do have relatively significant exit options,
whereas Chávez, Morales, and Correa govern economies based in petroleum and natural
gas. The obsolescing bargain that underlies investment in such sectors creates strong
incentives to for left governments to engage in resource nationalism, with important
implications for political polarization and the stability of a democratic system.
The post-2003 commodity boom. Although this is related to the asset specificity
argument, it conditions the effects of inequality through somewhat different mechanisms.
First, as Albert Hirschman once suggested in his famous “tunnel theory” of inequality,
the high growth that has come with the current commodity boom may have intensified
the dissatisfaction of those who continue to lag behind. To be sure, much more empirical
research on this question is necessary: people may be indifferent to inequality if their
own incomes are also rising. Even so, it is also plausible that – notwithstanding such
gains -- they may remain highly dissatisfied if they perceive that income differences are
widening.
Commodity booms and high growth more generally, moreover, provide incentives
for governments to ignore fiscal constraints in order to pursue broadly redistributive
social programs. Chávez, for example, veered substantially to the left in 2003 as oil
prices began to rise, and the populist tilt in Argentina has been sustained by the growth
surge that followed its debt default in the early 2000s. In short, commodity booms may
contribute to the politicization of class cleavages both by increasing the demand for
redistributive polices and by expanding opportunities for governments to supply them.
Insecurity and mobility Various forms of insecurity might also contribute to the
mobilization of protest against inequality. The fact that the poor are hit especially hard
by economic shocks and gain more slowly during periods of recovery might spur
collective action. The threat of downward mobility is perhaps more relevant to the
10
middle-class and near poor than to the poor, but might facilitate the formation of crossclass alliances.
Regional rivalries. The politicization of inequality is also likely to depend on the
availability of structural or political resources that reduce barriers to collective action. It
may matter whether income inequalities overlap with differences among geographic
regions. In a number of countries, the perception that particular regions appeared to be
falling behind seems to have provided an important foundation for political cleavages
among rich and poor. Note, for example: Mexico’s poor southern states voted solidly for
López Obrador in the 2006 presidential election. In Peru, the radical left candidacy of
Ollanto Humala was rooted in the impoverished regions of the Sierra. In Brazil, the poor
states of the northeast have moved equally solidly toward Lula. Not all left parties have
these geographic roots; indeed, those which fail to penetrate the hinterland typically gain
more support from the middle-class than the poor (Handlin 2007). Nevertheless, it may
be the case that voters in poor regions are integrated into communications and
organizational networks that reinforce incentives to vote left and/or to engage in social
movements and other forms of collective action.
Political Variables Most obviously, the politicization of class cleavages will
depend on political mediations: the extent to which the incentives facing political leaders
and the organization of interests is conducive to challenges to inequality. In some cases,
these incentives may depend on the policies pursued by governments already in power. In
Venezuela, for example, the divisive policies of the Chávez government are likely to
have effects on class conflict that endure far beyond the tenure of his government itself –
as was the case decades earlier under Juan Perón in Argentina. On the other hand, more
moderate left governments – such as those of Chile, Uruguay, and Brazil – are likely to
have an integrative effect that blurs the edge of class-based politics. The growing
literature on social movements is also relevant for understanding the extent to which
distributive politics is influenced by political openings, the strategies of movement
entrepreneurs, and the “cultural repertoires” that can be deployed in political
mobilization. In the Andean countries, for example, “ethno-populist” movements have
combined appeals to indigenous communities with more inclusive appeals to a broader
sector of the low-income mestizo population (Madrid 2007).
11
A final note on research. Dahl’s emphasis on the mediating importance of
perceptions of inequality underlines some important issues of empirical research as well
as theory. Yet objective measures such as the gini tell us nothing about these beliefs,
how they are socially constructed, and how they motivate political action.
As implied above, one notable step toward filling this gap might be greater crossfertilization between political-economy and some of the literature on social movements
and contentious politics. There is much room for skepticism about the extent to which
movement activists actually represent the subordinate groups for whom they claim to
speak. Still, a demand for equality is typically an important component of movement
rhetoric, and when this is linked to “durable inequalities” such as race or ethnicity, it may
play an important role in framing larger political cleavages and collective action
capabilities. In any case, we need to find out.
Perhaps an even bigger gap is the paucity of survey research which taps directly
into subjective perceptions of inequality and how these are linked “backward” to position
in the class structure and “forward” into political action. Some survey-based studies on
happiness conducted by Graham and Pettinato (2001) provide valuable, sometimes
counter-intuitive insights into the relationship between mobility and optimism about the
future. But these findings do not directly address a number of the questions posed
above, including their implications for political behavior. In any case, surveys are an
essential instrument for getting at the way people’s beliefs influence their propensity to
engage in distributive politics. A multi-method approach is clearly called for.
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